Most small business owners just hate the idea of having to keep books. But as a business owner that is one of your primary jobs. Depending on Dniel Diener who is a co-owner of the business success center in Central Texas and has been helping businesses for over twenty-five years. The difficult is really three parts to analysis of what those numbers mean. Below are the ways which researchers give the ways for small business owner learn.
Now you need to know that setting up books is kind of like learning word, Microsoft word, and English at the same time. It is very difficult because you have got to learn a bookkeeping system plus you have got to learn a software system at the same time. So it becomes difficult and it becomes frustrating. But as it is your job as the business owner.
So once you have set up a chart of accounts that is the accounts where you know your income is going to go, where your expense, your car expense, your advertising expenses, but it is also the balance sheet accounts which are really ownership accounts. Those account need to be set up to reflect how you actually do business. that is the key and even though most of you don’t want any part of this. Therefore, as business owners you have gotten do it in order to set it up the way you want it. So once you have got the accounts set up the way that make sense to you, so you can look at the accounts and say I know what is in there, I know what kinds of transactions or receipts or dollars are in that account.
Then the next step is how to do the data entry and to keep up with the day to day filling, processing receipts and all of that kind of stuff. Well again, most business owners the first person they want to hire is a bookkeeper and do all of that so they don’t have to.
We suggest strongly that you need to do that until you have decided exactly how you want most transactions processed where you want them filed. For instance, you have got a land line phone and you have got a cell phone, do they both go into the same expense category telephone or do they go into different places. You may have postage expenses. Do they dog under administrative postage or do they go under administrative and marketing or may be freight. You have got to make these kinds of decisions. What we suggest is that you keep a small notebook next to where you do your bookkeeping and every time you come across a new transaction, write down in the notebook exactly how you want it booked. So if you get a phone bill, we are going to book that to this account. If you get a freight bill, we are going o boo it to this account. So exactly how do you want it done. Once you have got eighty, ninety percent of the transactions done, and some are tricky. This like how are you going to do refunds.
Then the third step is really the owner’s job and it sis periodically reviewing the books and doing quality control. And saying what are these numbers trying to tell me. My sales went up, my expenses went down. Why did sales go up, whey did expenses go down? Is there a mistake some place? What is the number trying to tell you about what’s happening to your business. Now as small business owner, you intuitively know what’s going on. But the books become the validation of what you thing. Lots of business owners go out of business because what they think is not true. So keep a good set of books to make sure that your assumptions actually reflect the facts.
Source: Daniel Diener